After the Corona slump: Starbucks shares with recovery potential: This is how the coffee house chain masters the crisis | message
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Starbucks expects increased earnings per share
Drive-in concept popular during pandemic
Strong growth expected
Optimistic outlook for Starbucks stock after store closings
On its virtual investor day, the US coffee house chain Starbucks announced that it was expecting a “significant recovery” for the coming year, as “MarketWatch” reports. Previously, the company, which was badly damaged by the Corona crisis, was able to exceed expectations for the last financial quarter, despite losses in sales and a profit slump of 51 percent to 393 million US dollars compared to the same period of the previous year. In the wake of the corona pandemic and the associated containment measures, Starbucks had to close some branches or adjust its opening hours, and fewer customers visited the sales outlets. The food company now sees itself on the right path and expects adjusted earnings per share of US $ 2.70 to 2.90 for the 2021 financial year. In 2022, the adjusted profit per share is expected to grow by 20 percent; in the two following financial years, growth could be 10 to 12 percent in each case.
Although the price of Starbucks shares fell significantly at the beginning of the corona pandemic in March, it then recovered and then even exceeded its pre-crisis level. Since the beginning of the year, the paper has already increased by 17.39 percent. The share is currently traded on the NASDAQ trading platform at USD 103.21. This corresponds to earnings per share of $ 0.77 (the calculation is based on the closing price on December 10, 2020).
Starbucks responds to pandemic with drive-in counters
The company cites its reaction to the Corona crisis as the reason for the upward trend. “The recent disruption from the global pandemic has accelerated certain shifts in consumer behavior, and Starbucks has been quick to adapt its business to reflect the short- and long-term effects,” the company said, according to MarketWatch. Starbucks is now relying more on the delivery and collection of its products after previous orders. This also includes the expansion of drive-in counters in the USA, which was praised on Investors’ Day and which were widely accepted, especially during the pandemic. This enables customers to place and receive their order directly from the car. In order to make the service better known, the coffee dealer is currently offering drive-in customers in the USA a free air freshener when purchasing the special offer drink “Peppermint Mocha”. According to a report by “Business Insider”, the group plans to open 22,000 new branches worldwide by 2030 and thus operate a total of around 55,000 locations. Within the next three years, branches with drive-in counters are expected to make up around 40 percent of Starbucks shops in the USA, and 80 percent of the new branches are to have the service. The company is also further improving the concept in order to cope with large numbers of customers. The group plans to build several lanes next to each other, install new technologies and optimize the preparation processes. The plans are also well received by Stifel analyst Chris O’Cull: “The drive-in model is already one of the most productive units in the company’s range,” Business Insider quotes the strategist.
Starbucks’ China business also recovering
Even before the coffee production and sales company felt the effects of the pandemic in its US business, Starbucks’ Chinese branch network was already suffering from the virus and the restrictions that came with it. Now the group is also assuming a recovery here, after all, the Chinese mainland represents the second largest overall market and the fastest growth market for the coffee house chain. Starbucks expects annual sales growth of 2 to 4 percent from 2023. Around 600 new branches are to be opened here within the next year, according to the “Seattle Times”, of which ten percent are said to be “Starbucks NOW” stores – a branch concept that focuses on take-away products and cashless payments and is therefore also aimed at food suppliers. By the end of the 2022 financial year, a total of 6,000 locations in 230 cities should have opened in China. In the People’s Republic, the retailer’s digital offer is also very well received: by September, the proportion of transactions carried out on mobile devices had more than doubled since the beginning of the year and made up a quarter of all orders in this period. “China is something of a leading indicator of where the digital consumer is developing,” Starbucks CEO Kevin Johnson told the Financial Times.
Coffee market is experiencing strong growth
Furthermore, the coffee company announced at its investor day that the addressable coffee market will increase by 5 to 6 percent to 450 billion US dollars in sales by 2023, according to the analysis company Euromonitor. To respond to this, the company wants to increase its market share not only in the US but also globally. “As a premium and highly differentiated brand, Starbucks executives are very optimistic about the future of coffee,” said the retailer in a press release. “The brand shared its focus on promoting innovation by improving the customer experience and developing new and relevant beverage platforms.” For example, the coffeehouse chain is further differentiating its range and adding oat milk to its range until spring 2021, after soy, coconut and almond milk are already being offered as alternatives to conventional cow’s milk.
Starbucks also announced an organizational change: Mellody Hobson, who has been a member of the Board of Management since 2005 and was appointed Vice Chairman of the Board of Management in 2018, will take over the management of the Board of Management from March 2021. Hobson’s predecessor, Myron E. Ullman, III, will be leaving the position on the occasion of his upcoming retirement.
Finanzen.net editorial team
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